Changes for Citi
A behind-the-scenes look at the recent shake-up at the rental behemoth — and why company execs say it’s good for the bottom line
Tongues wagged in the industry last month when Gordon Golub, a top executive and 18-year veteran at residential real estate brokerage Citi Habitats, left the firm for the tech start-up Urban Compass.
His departure is the latest in a series of significant changes at Citi Habitats, one of Manhattan’s largest firms and its most dominant rental company. Citi’s head of new development marketing, Clifford Finn, left for Douglas Elliman this fall, and his division was moved over to Corcoran Sunshine, the new development arm of the Corcoran Group, which acquired Citi Habitats in 2004. Also in the last year, Citi launched a rebranding campaign and saw Realogy — its parent company — issue a much-hyped IPO. Citi also announced the closures of offices at 27 East 22nd Street and 32 East 22nd Street, bringing its total office count to nine, down from 17 at its peak.
These changes appear to be having an impact on the firm.
The number of Citi Habitats agents dropped to roughly 630 agents as of last month, down from 673 in 2011 and 816 in 2008, according to The Real Deal’s most recent ranking of the city’s largest firms. And while Citi has made a push in recent years to establish itself in the sales arena, the company has seen its exclusive sales listings fall from 228 in May 2011 to 130 last month.
But in a sit-down interview with TRD last month, Corcoran Group CEO Pamela Liebman and Citi Habitats president Gary Malin dismissed the drop in listing volume, noting that Citi had a “banner” year in sales for 2012. (The company declined to provide a dollar figure for its sales in 2012.) Plus, they said Citi has consistently maintained its roughly 50 percent market share in rentals.
As for the drop in agent numbers, Malin attributed that to the normal “ebb and flow” of the real estate business. He added that the company’s recent reduction in office space means it can’t accommodate as many agents right now.
“We’re in the process of reinvigorating our company in terms of its offices,” he said. “When you reduce the number of offices and look to secure much larger offices, there’s going to be a gap between what you are today and what you’re going to be tomorrow.”
Still, real estate industry insiders said the loss of managers and top-
producing agents can’t help but hurt Citi Habitats’ bottom line and market position in the long run.
That’s especially true because the departure of high-ranking veterans from real estate firms often “has collateral damage that comes along with it,” said rental industry veteran Anthony Lolli, CEO of Rapid Realty. “When one of these senior people decides to leave, it really opens up the door for others to follow.”
Citi Habitats was famously founded in 1994 by Andrew Heiberger, now the CEO of brokerage Town Residential.
Heiberger initially stayed on as Citi Habitats president after the company’s acquisition by Corcoran, but left after a year. Malin, an attorney and Heiberger’s college roommate, was promoted to president of Citi in 2008.
During their interview with TRD last month, Malin and his boss seemed at ease, with Liebman quipping that Malin still lets her win at golf.
Citi Habitats started out by focusing on young professionals renting New York City apartments, Malin recalled. The premise, he said, was that happy rental consumers would eventually return to Citi as homebuyers. Citi also started a new development division to take advantage of the mid-2000s housing boom, taking on exclusive marketing contracts for projects such as Silverstein Properties’ massive rental complex Silver Towers and the Forest City Ratner rental tower New York by Gehry.
The firm grew quickly, making its way to the top of the city’s brokerage heap. In a 2007 TRD ranking of Manhattan rental firms, Citi was by far the largest. It has since retained that position; the firm said Citi Habitats does the most rental transactions of any firm in the city and has the most exclusive rental listings.
Top brokers there include sisters Tracie Hamersley and Elizabeth Hamersley, Caroline Bass and Jason Saft, who recently made headlines when Yankees slugger Derek Jeter checked out his listing for a $25,000-per-month rental at 129 West 20th Street.
By the time it was sold to Corcoran, Citi Habitats had more than 800 agents and 17 Manhattan offices, plus two spaces for SóLOFTS, an offshoot of Citi Habitats focusing on loft and home sales. The deal with Corcoran, which is owned by NRT, was reportedly valued at $49.6 million. (Liebman told TRD the figure was inaccurate, but declined to provide the correct amount.)
NRT is a subsidiary of Realogy, the parent company of national franchises such as Coldwell Banker, Coldwell Banker Commercial, Better Homes and Gardens Real Estate, Sotheby’s, Century 21 and ERA (see related story, “Who really owns NYC’s real estate firms?”)
The marriage of Corcoran and Citi Habitats seemed like a match made in real estate heaven, bringing together one of the city’s largest sales firms with its biggest rental firm. But while the initial transition appeared to be smooth, sources told TRD that the two companies soon began stepping on each other’s toes.
Heiberger declined to comment for this piece, but sources said he viewed the merger as a means to accelerate Citi’s growth as a sales firm. It had been agreed, for example, that Corcoran would appoint experienced sales managers to help train agents at Citi Habitats. But sources with knowledge of the firm’s inner workings said that never happened. In fact, Liebman and Malin told TRD last month they had no knowledge of any promise relating to the installation of managers from Corcoran.
Meanwhile, the SóLOFTS offices were rebranded as Corcoran locations.
“Citi Habitats was selling more and more apartments, and Corcoran didn’t particularly like it,” said one former manager at Citi. “They wanted it to be a rental company that did some sales.”
In fact, multiple sources close to the firm said, especially in the early days of the merger, Corcoran tried to limit Citi’s growth in the sales market to prevent it from competing with the older firm. Liebman and Malin strongly denied that claim. Indeed, Citi Habitats’ newly unveiled logo emphasizes its focus on both rentals and sales.
“As well as being president of Corcoran, I’m a senior regional vice president for NRT,” Liebman said. “In that capacity, I am as invested in Citi Habitats’ success as I am in Corcoran’s success.”
When Malin took the company’s reins in 2008, he spoke publicly of his desire to increase Citi’s presence in the sales arena. And at first, the plan seemed to have worked, even during the recession: Between 2008 and 2011, Citi’s exclusive sales listings grew from 156 to 228, according to TRD’s rankings.
But during that same period, the firm’s agent count dropped, falling from 816 in 2008 to 630 in 2012. While many firms lost agents during the financial crisis, according to TRD’s data, Citi is the only one of Manhattan’s five largest firms to shrink in size between 2011 and 2012, a period when the city’s rental market was booming. All the other firms in the top five grew. In fact, Bond New York, a sales and rental company founded by Citi Habitats alumni, saw its ranks swell by some 12 percent between 2011 and 2012, while Citi’s dropped by roughly 7 percent, according to TRD’s rankings.
High-profile managers also left Citi Habitats. In 2010, for example, former Citi Habitats director of sales Greg Young departed after 10 years at the company.
Young, or “G-Money,” as he was nicknamed, had created a well-regarded rental training program at Citi, meeting with each agent at the company a few times a year to review their progress. Young, who left to start a real estate training and consulting company called Broker Heaven NY, declined to comment for this piece.
In 2011, Sara Rotter, Citi’s director of sales for the Gramercy, Flatiron, Chelsea and West Village offices, left the firm to join Halstead Property. Top-producing broker Dina Cohen followed in 2012. They also declined to comment on the reasons for their departure.
And when Heiberger founded Town Residential (after his noncompete clause with Citi had expired), a number of Citi brokers and staff went to work there. Those who defected to Town included Citi Habitats managers Matthew Van Damm, Juliet Clapp, Eric McCarthy, Itzy Garay, and Chris Reyes, Citi’s former director of information technology. Former Citi Habitats top producers now at Town include Jimmy Brett, Cord Stahl, Evan Rosenfeld and Danny Davis, who was named Citi’s top-grossing agent for sales and rentals in 2010.
Liebman said the existence of Town has not significantly impacted Citi Habitats, however.
“If Andrew didn’t open his firm and somebody wanted to leave, there are 20 other companies they would have gone to,” she said. “We don’t look at Town any differently. There’s a thing in this business called “the shiny penny.” He was the shiny penny for a while because he was brand-new.”
Many New York City agents switched brokerages during the recession and most firms took steps to cut costs. Indeed, multiple sources cited limited resources at Citi Habitats — stemming from the financial crisis — as one reason so many top agents and managers have left.
Rado Varchola, who was Citi’s top individual broker by overall production and top individual broker in sales for 2011, cited lack of support as the reason he departed the company last year for Nest Seekers International.
“NRT is a huge corporation,” Varchola said. During the housing downturn, “they were losing money nationwide. There were many cuts, and the company just didn’t have the resources to show me the support I was looking for.”
“After being named No.1 in 2011, I was expecting a tremendous amount of support and it wasn’t delivered,” he added.
Malin downplayed the significance of departures like Varchola’s.
“Just because an agent was a top agent in 2010 doesn’t mean necessarily that in 2011 or 2012 he or she will be that top agent again,” Malin said.
And Liebman told TRD that no cost-cutting has been done at either company since 2009, when Citi Habitats offices were shuttered on West 57th Street and in the Financial District. In fact, overall expenditures have actually been on the rise at both firms, she said. In regards to the two recently closed Citi Habitats offices, Liebman called that move a “strategic business decision” and said the company is already looking to replace them with new, larger spaces in other locations.
She noted that it made little sense to have two retail locations in such proximity to Citi’s corporate headquarters at 250 Park Avenue South.
“It’s not a plan that we would ever follow again, opening small offices in street-level locations,” Liebman said. “Financially, it simply doesn’t work. You need a certain mass of people, and you can’t get that in these small retail locations.”
Insiders agreed that consolidating the spaces is likely a smart financial move, but also speculated that the decision may have been prompted by the rush to show “short-term profitability” in the run up to Realogy’s IPO. Malin denied that the IPO impacted the decision, however.
For his part, Golub said he left his position as Citi’s rental director “on great terms,” and his departure was motivated simply by a desire for a change of scenery.
“If you were to talk to 100 people,” said Golub, “how many do you think would have been at the same company since college? Not many. I’d be one of them.”
But the departure of longtime veterans like Golub can have something of a snowball effect, industry insiders said. Some former Citi brokers said they’d felt loyal to Golub and that he was a big reason they stayed at the company as long as they did.
Now that he’s gone, “there have to be some Gordon loyalists who now don’t have much reason to stay,” said one source.
Liebman and Malin said they were saddened by Golub’s departure, and that the door is always open for him to return to Citi.
Citi underwent another major shift in October, when Finn and his team of nine agents left to join Douglas Elliman.
Liebman said their departure followed a decision to eliminate Citi’s new development team and consolidate it with Corcoran Sunshine. (Finn did not return calls for comment.)
The consolidation was prompted by the lack of new rental product coming online in the next few years, Liebman said. Citi had very little new development business remaining when the division was discontinued, with the majority of its projects already leased up, Malin added.
“The rental pipeline in New York City has drastically changed,” Liebman said. “The decision was made moving forward that we probably needed to look at having one division.
There is not a need for a large-scale new development division at Citi Habitats at this time.”
She and Malin declined to comment on Citi Habitats’ new development revenue in 2012, but said volume was down significantly from 2011.
“The division was scheduled to lose money,” Liebman said.
Citi does not plan to hire new people to fill any of the 10 spots emptied by the closure of its new development arm, Liebman said, and the firm has already seen an “immediate, direct positive impact” to its bottom line as a result of the consolidation.
Malin also cited a trend toward developers marketing rental projects in-house.
“Related does its own business, Glenwood does its own business, Rose Associates hires itself,” he said.
But other new development marketers said they are doing more rental business, not less. Stephen Kliegerman of Terra Development Marketing said he was not familiar with Citi Habitats’ strategy, but noted that Terra is seeing an increase in rental business.
“We’re more active in rentals than we have been in the last seven years,” said Kliegerman, who said Terra is in discussions to bring more than 2,000 rental units to the market over the next two years. “We’re actually beefing up our rental presence.”
When it came to new developments, Citi had a unique model that may have impacted its ability to attract new business, sources said.
Citi landed development marketing contracts by charging developers lower upfront fees than other firms, said Andrew Barrocas, a former Citi Habitats agent who is now CEO of the brokerage MNS, which has competed with Citi for new development marketing projects. Citi was able to make up the difference by spreading the word about these projects primarily to their in-house agents, then benefiting from a steady flow of commissions.
“What they were taking jobs for was far less than what we were able to take them for and have it make sense,” Barrocas said.
But paying those brokers’ fees could be costly for developers, he noted.
“They’re able to go in a little bit less expensive on the front end, but it ends up costing the developer more in the long run,” Barrocas said.
Malin declined to comment on Citi’s fees for new development marketing.
In addition to these shifts, Citi has tweaked its image several times. Aiming to change its rentals-only reputation, Citi Habitats in 2010 renamed its sales division, calling it “CitiSales” — but that name no longer appears to be in use. And last fall, Citi unveiled a new logo and branding materials, ditching its longtime blue-and-white color scheme for black and white with touches of yellow, with the slogan “Sales + Rentals. Knowledge + Guidance.”
Liebman said the rebranding is an attempt to emphasize Citi Habitats’ dual focus.
“Some people would say that [Citi is] a victim of its own success in rentals,” she said. “Part of our rebranding campaign was bringing to more people’s attention that Citi is not just the city’s top rental company; it is a company that is successful in both sales and rentals.”
Ultimately, industry insiders said, that duality may be at the core of the firm’s problems.
Citi Habitats has “an identity problem,” said Bellmarc Group President Neil Binder. “It doesn’t know what it wants to be. It started out as a strong rental company and then it tried to get into the sales side. It gave mixed messages to the market, and that impaired it.”
Ramping up sales at Citi Habitats is also a priority for Golub’s successor, Peter Sobeck, who previously led a training and coaching program for sales managers at NRT.
Sobeck told TRD he plans to leverage Citi’s “heavily weighted rental platform” to increase the company’s sales.
Meanwhile, Malin said he isn’t worried about the direction of the company, which has just come off its strongest sales year in history and a busy year in rentals.
“We transact with more people in New York every year than any other firm by a landslide,” Malin said. “Those facts speak for themselves.”
CORRECTION: In a February issue story, The Real Deal incorrectly stated that broker Dina Cohen moved from Citi Habitats to Halstead Property in 2011. She actually moved firms in February 2012.